Ch27: Introduction to Economics

• Factors of Production:

  • Land - refers to all natural resources available in a country that can be used to produce goods and services. Ex) agricultural land, mines, seas
  • Labour - refers to the people available in a country that can produce goods and services with the qualifications and skills they have, ex) plumbers, pilots, architects.
  • Capital - refers to all man-made things available to assist the production of goods and services. Ex) machinery, equipment
  • Enterprise - bringing together the land, labour and capital to set up a business to produce a good or service at a profit.
• Each factor of production is supposed to give back a source of income, for example;

  • Land should give back rent
  • Labour should give back wages
  • Capital earns interest
  • Enterprise should bring profit
• While the resources we have are limited, our needs and wants are unlimited. This means when we have to think about we will spend our resources, we must consider these points:

  • Financial cost
  • Opportunity cost
  • Benefits to the organisation it gives
  • Benefits to society
  • Any additional costs it brings that we pay for
  • The cost to society